Technology: Logistics - ' Standards '

STANDARDS

Ultimately, your ability to create flexible logistics processes with suppliers and customers will come down to standards—and there's the rub.

If the linchpin of supply chain logistics is the flow of information, then the standards used to exchange information between players in the supply chain are key. In the early 1990s, large companies known as "channel masters" were able to force their suppliers to adopt Electronic Data Interchange standards, or simply stop being suppliers. But many suppliers who adopted EDI are less than eager to shift over to newer standards such as XML—in part because there are so many standards to choose from. "There are hundreds and hundreds of different standards that exist," says Descartes' Mesher, "and everybody has a business issue of not subordinating to someone else."

How will the inevitable disagreements over standards be resolved? Mesher points to several strategies for companies attempting to put together next-generation supply chains. The first is the channel master, the 800-pound gorillas such as Dell and Wal-Mart who can simply mandate standards that its suppliers must follow. The second Mesher calls "the chameleon," characterized by companies such as FedEx Corp. Using varying levels of business process customization, these companies present whatever face is most appropriate for the customer, adapting heavily for larger customers and guiding smaller customers toward more homogenized services.

The third approach is "the grange member," smaller members who band together to aggregate their buying and selling power in hopes of mandating standards. But historically, such initiatives fail miserably because their members often can't remain consolidated forever. The last approach is the "Zen master," which is a company that assumes it will continually be buffeted by the decisions of its larger customers. Ultimately, most companies will need to have at least some characteristics of the Zen master, designing their logistics processes to support continuous improvement—and to be able to interact with new and existing channel partners as flexibly as possible.

Ask Your Chief Logistics Officer: Which industry standards do our customers and suppliers want to support—and which ones do we want them to support?

Ask Your Business Strategists: Which standards approach is most clearly linked to our company's strategic goals?

Ask Your Chief Technology Officer: Which standards should we support to keep from being buffeted by the winds of change?